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When In Doubt, Do More of the Same?

James Taranto writes on the Left’s fixation with passing yet another stimulus:

The economy is in recession, unemployment is rising, and some on the left, including former Enron adviser Paul Krugman, think the solution is massive new federal spending–a “stimulus” bill.No, our column has not gone into summer reruns. Congress passed the so-called stimulus in February, and Krugman, writing in today’s New York Times, wants another one. “The bad employment report for June made it clear that the stimulus was, indeed, too small.”

Of course, there is another possibility. Perhaps the harms caused by massive new government spending outweighed the benefits, so that the stimulus didn’t help or even made matters worse.

Indeed, it’s not as if we weren’t drowning in stimulative cash already. The Washington Post editors even figured that one out:

The Obama administration projects that the federal budget deficit for the fiscal year ending Sept. 30 will hit $1.8 trillion, or 12.3 percent of gross domestic product. Mr. Obama’s budget plan calls for an additional $1.2 trillion deficit, or 8 percent of GDP, in fiscal 2010. Both figures reflect not only the $787 billion stimulus plan adopted in February but also the countercyclical impact of “automatic stabilizers”: During recessions, tax receipts decline and transfer payments such as unemployment benefits increase. The previous postwar deficit record, set in 1983, was 6 percent of GDP.

Meanwhile, the Federal Reserve has driven its target interest rate to nearly zero, opened its discount window to a wider range of financial institutions and expanded its balance sheet by more than $2 trillion through purchases of government bonds and mortgage-backed securities.

In other words, those calling for an additional stimulus package must explain why this is not enough.

These things simply don’t work, as Christina Romer had amply argued before her captivity in the Obama administration. But liberals are loath to admit failure and utterly unwilling to recognize the damage that Stimulus I along with the other Obama agenda-items may be doing to the economy. We risk sucking up the world’s available credit, pushing up loan rates for consumers here and around the world, and short-circuiting our already limp recovery. And in the long run, the spend-a-thon, regulatory burdens, and tax plans will slowly but surely dampen the private sector and our ability to generate growth, jobs, and wealth.

But Obama and Krugman are true believers. No amount of failure, I suspect, will be sufficient to deter them. When unemployment hits 10%, might they then have second-thoughts? Well, the voters certainly will.



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